To test the roles of lipid oversupply versus oxidation in causing tissue lipid accumulation associated with insulin resistance/obesity, we studied in vivo fatty acid (FA) metabolism in obese (Obese) and lean (Lean) Zucker rats. Indices of local FA utilization and storage were calculated using the partially metabolizable [9,10-3H]-(R)-2-bromopalmitate (3H-R-BrP) and [U-14C]-palmitate (14C-P) FA tracers, respectively. Whole-body FA appearance (Ra) was estimated from plasma 14C-P kinetics. Whole-body FA oxidation rate (Rox) was assessed using 3H2O production from 3H-palmitate infusion, and tissue FA oxidative capacity was evaluated ex vivo. In the basal fasting state Obese had markedly elevated FA levels and Ra, associated with elevated FA utilization and storage in most tissues. Estimated rates of muscle FA oxidation were not lower in obese rats and were similarly enhanced by contraction in both lean and obese groups. At comparable levels of FA availability, achieved by nicotinic acid, Rox was lower in Obese than Lean. In Obese rats, FA oxidative capacity was 35% higher than that in Lean in skeletal muscle, 67% lower in brown fat and comparable in other organs. In conclusion, lipid accumulation in non-adipose tissues of obese Zucker rats appears to result largely from systemic FA oversupply.